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Property taxes may be capped, but our use of tax money grows

If it seems like property taxes keep going up and up and up, you're not imagining things. The biggest taxing units in Elkhart County required more in property tax funding per capita -- much more, in some cases -- between 2000 and 2008, according to an analysis of property tax and population data.

Posted on April 4, 2010 at 1:00 a.m.
| Updated on April 4, 2010 at 5:06 p.m.

See attached chart of property tax information in the Story Media Player below.

If it seems like property taxes keep going up and up and up, you're not imagining things.

The biggest taxing units in Elkhart County required more in property tax funding per capita -- much more, in some cases -- between 2000 and 2008, according to an analysis of property tax and population data. That's to say the varied taxing entities -- three cities, four towns, seven school districts and the county -- spent more in property tax funds, per person, to provide their varied services, even adjusting for inflation.

The increase was minimal in a handful of cases. In Bristol, for instance, per capita property tax spending jumped by just $4 per resident in real terms in the eight-year span, from $596 per resident to $600.

Moreover, it should be noted that property tax needs, taken alone, aren't the full measure of a city, school or other taxing unit's spending. Income taxes, gas taxes and fees, depending on the entity, also figure in the mix, bearing on overall spending changes year to year.

That said, property taxes are one of the most important revenue sources for local government, typically accounting for half of all municipal funding, give or take. And they are one of the most scrutinized, loathed and maligned taxes, judging by the attention they get from state lawmakers and homeowners.

Homeowners across Indiana rose up in anger in 2007, when their bills increased by 23.6 percent, on average, compared to 2006. That jump prompted legislation in 2008 creating ever-more stringent caps on property taxes, meant to limit how much property tax bills may increase from year to year. In fact, voters statewide go to the polls in November to weigh in on a measure that would enshrine property tax caps in the state constitution.

The limits are 1 percent for homeowners on their home's assessed valuation, 2 percent for rental property, and 3 percent for business and industrial property.

Look at the accompanying graphic to see how property tax needs changed in Elkhart County's three cities and four largest school districts. Remember, though, that per capita demand isn't a measure of what taxpayers pay. Individual bills combine need from the varied taxing units that serve where a homeowner lives or where a business is located.

Rather, the per capita figures offer a measure of how much each taxing unit spends, per person, to provide services and how that has increased.

WHY THE INCREASES?

In the case of the school districts, building projects -- like the new junior high in the Concord school district and Middlebury's new high school -- figured big in the per capita spending increases. The cost of providing employee health care factored in the jump experienced by the cities.

Elkhart County: The per capita property tax increase required by Elkhart County government in the eight-year period, 6.3 percent, was one of the smallest hikes among larger taxing entities.

County Commissioner Mike Yoder cited county officials' "pay-as-you-go" philosophy in handling big-ticket projects, like the ongoing Six Span Bridge and Johnson Street Bridge projects. Rather than borrowing, the county has preferred to use funds it has, limiting bonding costs, which are commonly covered through property taxes. A special 0.25 percent income tax is helping pay for the county's $97.3 million jail, opened in 2007, avoiding the need for property taxes.

Even so, Yoder says in an ideal world, property tax spending, per person, would remain flat from year to year, accounting for inflation. Even better, it would go down as efficiencies and economies of scale are achieved.

Elkhart: City Controller Steve Malone said the cost of providing health insurance for city employees has jumped by "pretty substantial amounts" from year to year, factoring in Elkhart's 7.9 percent per capita spending hike. The rising cost of providing trash removal service also figures in the mix.

He doubts that keeping property tax spending flat from year to year is achievable, in part because there are so many factors that city officials can't control, like health care costs. Indeed, the 7.9 percent figure was lower than he would have expected.

Goshen: Mayor Allan Kauffman said increasing health insurance costs for city workers pushed property tax spending between 2000 and the middle of the decade, helping motor per capita spending of 30.9 percent in the eight years. That's the biggest jump of Elkhart County's larger taxing entities.

Moreover, the city added police and fire personnel to keep up with population growth, creating additional demands for property tax revenue, while city workers' wages went up.

On the bright side, switching to a new health plan after 2004 helped temper growth in health insurance costs.

Kauffman questioned the validity of looking at just property tax spending as a function of municipal efficiency. Other revenue sources have dwindled, he said, and property tax funds have helped "pick up the slack."

Nappanee: Health insurance has gone up significantly from year to year, according to Clerk-Treasurer Kim Ingle, putting pressure on property tax expenditures.

She questioned the validity of the per capita figure as a gauge of spending, though, and said the city has been shifting expenses away from property taxes. The per capita spending hike in Nappanee measured 23.3 percent between 2000 and 2008.

Elkhart Community Schools: The Elkhart school district hike, 3.6 percent per student, was the smallest of the larger taxing entities.

The absence of large-scale building projects from 2000 to 2008 probably helped, said Doug Hasler, who handles the school system's finances. He also cited economies of scale a large school district can achieve, in buying bulk supplies, for instance.

The pressure to increase spending is omnipresent, in part to keep classrooms up to date with the latest technology. Mandates and requirements from the state and federal government also create new costs.

Concord Community Schools: Increasing enrollment and crowding has necessitated construction of a junior high school and upgrades to existing buildings, according to Superintendent George Dyer. "We've really struggled to find instructional spaces," he said.

The fix is a $63 million plan that encompasses ongoing construction of the $37 million junior high at C.R. 11 and C.R. 24. The existing junior high school will be converted to an "intermediate school" for the district's fifth- and sixth-graders, while the four elementary schools are also getting upgrades.

The district bonded for the $63 million and annual payments are being covered, in part, by property taxes, which helped motor the 17.4 percent hike in per-student property tax spending. Having growth is good, Dyer said, but it "brings about some challenges" in planning to meet the needs of the larger student body.

Goshen Community Schools: Like Concord, enrollment growth spurred a large-scale construction plan in 2004 and 2005, helping push per-student spending up 11.2 percent in the Goshen school district between 2000 and 2008.

As part of the $46 million plans, the district built Prairie View Elementary and renovated Parkside, Model, Chamberlain and Waterford elementary schools. Funds were borrowed to cover the cost and bond payments, about $3.7 million per year, started in 2007, according to Superintendent Bruce Stahly

Middlebury Community Schools: Once again, rising enrollment prompted big-ticket construction plans, leading to a 21.2 percent increase in per-student spending.

More precisely, the district borrowed $80.16 million to build a new high school, complete with pool and auditorium, and renovate existing school structures. Payment of the debt on the improvements started in 2008, with annual payments of $5.49 million.

On top of that, said Superintendent Jim Conner, the school borrowed to buy out an unfunded teacher retirement program, something other districts had to contend with, too.

Some Middlebury residents challenged the pool and auditorium plans, but proponents prevailed, and Conner noted the benefits of the new high school to the community. The Middlebury school system's strong reputation has drawn residents to the community, helping keep it vibrant.